Coyote Blog

I have to tell one of my favorite stories of chutzpah.  In the 1940's and 1950's, railroads were making the transition from steam engines to diesel engines.  One of the changes was that a diesel engine only needed a driver, it did not need a fireman as steam engines did to shovel coal and keep the boiler running well.   The unions of course saw this coming.  So what did they do?  They preemptively made the demand that diesel engines should have to have TWO fireman.  Railroads spent so much time fighting this insane proposal that it took them years to get the firemen per locomotive to the correct number (ie zero).

I am reminded of this story when I think of how the Obama administration has handled the issue of CO2 abatement.  Reasonable people understand that CO2 abatement will be horrifically expensive - it just will not be cheap in terms of cost or lost economic output and lost personal liberties to take the country back to a CO2 per capita it last had in the 19th century.     But rather than taking this on, the Obama administration preemtively attacked, saying that in fact Co2 abatement would lead to economic growth and job creation.  This was the broken windows fallacy on steroids, but the usual progressive illiterates and consumers of party talking points have run with it.

We are finally getting folks to start to address the true costs of CO2 abatement, and they are enormous.  People who push the precautionary principle try to say that even a small risk of climate catastrophe outweighs some minor abatement costs.  But does a small change of manmade warming outweigh a near certainty of enormous economic costs?

I have said for years that to really get to an 80% reduction target, gas prices would have to rise over $20 a gallon  (they are at $10 already in Europe and they are no where near the targets).  Some researchers looked at the gas price implications of more modest CO2 targets:

To meet the Obama administration's targets for cutting greenhouse gas emissions, some researchers say, Americans may have to experience a sobering reality: gas at $7 a gallon.

To reduce carbon dioxide emissions in the transportation sector 14 percent from 2005 levels by 2020, the cost of driving must simply increase, according to a forthcoming report by researchers at Harvard's Belfer Center for Science and International Affairs.

And this is with a straight tax, probably the most efficient way to hit the targets.  The study agreed that other intervenist approaches didn't seem to work as well as a straight tax:

In the modeling, it turned out that issuing tax credits could backfire, while taxes on fuel proved beneficial.

Apparently our state government has been in another subsidy bidding war over a plant relocation, and fortunately it lost.  Why the state government pulls together Defcon 5 activity levels to bring 80 jobs to a town of 4 million is just beyond me.  But beyond my usual problems with subsidizing business relocation, which haven't changed from this post way back when I talked about relocation subsidies in the context of the prisoner's dilemma, I have three issues specific to our state's efforts to attract solar manufacturers:

1. I am constantly amazed at the strategic planning that says Arizona residents should pay more taxes to promote a solar manufacturing industry because, uh, we have a lot of sun.  That's roughly as logical as saying an FM radio maker should manufacture in NY City because they have a lot of radio stations.  I suppose you could argue it would reduce shipping costs to solar using areas, but I can't believe that shipping costs dominate since most of the panels we buy in this country originated in Japan or Germany.
2. Companies and industries that seek subsidies are like hot money in the investment world.  Even if you attract it today, they will jump next week to another location that offers them more.  We see it in this case, as AZ bought Kyocera's presence at one facility but can't afford the price to get them to build this new facility.
3. The state's approach defies all business strategy, and is making a typical novice investment approach.  Specifically, they are chasing the hot industry.  Everyone is bidding for solar plants, so the price goes way up.  This is why we have bubbles in housing and Internet, because people all pile into the same investment like lemmings.  If I were to run a government business relocation strategy (which I most certainly would never do) I would be focusing on boring stuff no one subsidizes.  We offered nearly 100% property tax abatement plus investment tax credits and can't get a solar plant.  Instead we should be up in business hostile states like CA and NY getting rubber stamp makers and garage door manufacturers.  Surely we could get 70 jobs a lot cheaper.

The other day I was happy to see lefty Kevin Drum pointing out the obvious problems with subsidizing Edit Post "¹ Coyote Blog "” WordPressethanol.  This is a step forward, when smart people on both sides of the aisle can agree that a certain approach is dumb.  Of course, given the incentives in government, that doesn't mean that ethanol subsidies will actually stop.

So we make some progress on ethanol, but just replace it without another absurdly dumb subsidized energy technology, in this case wind.  Wind is not even close to being ready for grid service, and given the hot backup power one needs to cover its unpredictability, it does about zero to reduce CO2 emissions.  A series of studies have shown that it has done nothing to reduce fossil fuel consumption in either Germany or Denmark.  And the whole green jobs thing is even more absurd -- it makes no sense theoretically, as shifting private investment to less economically viable uses has never, ever created jobs -- and has been debunked in practice in both Denmark and Spain.

Unfortunately, the Obama administration has bent over backwards to ignore the science and push wind, for no other reason I can figure out except to avoid admitting he was wrong when he campaigned on wind.  This makes for a pretty depressing story, and, given there are more documents the Administration is resisting releasing under FOIA, probably more ugly news to follow.

Postscript: One way you could use wind is with some kind of storage system, of which I can think of two.  The first is to use wind to pmp water up hill into a reservoir where the potential energy could later be harvested as hydroelectric power.  The other is to use the wind power to make hydrogen from water.  You need some sort of process that can be stopped and started on short notice.

... so it's probably about time.  Kevin Drum has a very cogent analysis of all the issues, and is, if anything, givin ethanol the benefit of the doubt with some of the numbers he uses.  He ends by echoing something I have said any number of times:

Bottom line: corn ethanol is no greener than gasoline. In fact, it's almost certainly less green, and at the very least, there's no urgent need for the U.S. government to pay billions of dollars to subsidize its production. Too bad Iowa is the first state on the primary calendar every four years, isn't it?

What I find amazing is that when he wants to, Drum can be quite insightful about this kind of political failing,  What I don't understand is why he continues to advocate programs like government health care that are almost assured of being dominated by the same horrible incentives and decision-making.  Under either the House or Senate health care bills, for example, just imagine the line of lobbyists who will be working to get their pet procedures covered under insurance  must-cover rules.  How can he possibly imagine that the same Congress that votes for ever-expanding ethanol subsidies is going to make good cost-benefit tradeoffs based on science for health care procedures?   Doing the same thing over and over and expecting different results is the definiation of, what?

So the head of the IOC declares the Olympics over, the flame is out, but there still seem to be people on the stage.  It seems that Canadians, so long without an overt sense of nationalism, have decided to use the stage to hold a pep rally for their country.   Can you imagine how unbelievably creepy, and probably scary, it would have been had the Chinese closed the Olympics in a similar China-uber-alles manner.  But since the Canadians are thought to be (mostly) harmless, I suppose its OK.

Postscript: Not 30 seconds before this started, I was lamenting the fact that Rush was not a musical act, with the silver lining that we had not seen William Shatner either, when lo and behold he rises onto the stage.

PPS: I thought the way they opened the show, with the clown fixing the broken torch, was much more consistent with the Canadian style, and more flattering in a sense than the goofy show at the end.  It is particularly funny, to me at least, to see that all the people who they have chosen so far to extol the virtues of Canada actually left the country for the US to make their fortune.  What are they selling, that Canada is a great place to be from?  They couldn't have found someone like Jim Balsillie who actually mad his fortune and reputation, you know, in Canada.

PPPS:  OK, it was only the talking quasi-celebrities I thought was odd.  Who couldn't love the giant inflatable beavers that followed?

I had a dinner conversation last night with my Massachusetts mother-in-law.  She is pretty interesting to talk to because she is a pretty good bellwether for Democratic talking points on most issues.  She was opposed to the recent Supreme Court speech decision removing limits on third party advertising near an election  (I think she misunderstood the scope of that decision but that is not surprising given the shoddy reporting on it, up to and including Obama getting it wrong in his State of the Union).   She advocated strict campaign spending restrictions (both in terms of amount of money and length of the campaign season) combined with term limits.

We could have gone a lot of places with the discussion, but we ended up (before we terminated the conversation in the name of civility) discussing whether restrictions on money were equivalent to restrictions on speech.  She of course said they were not, and said under strict monetary controls I still had freedom of speech - weren't we still talking in the car?

It is hard to reach common ground when one person is arguing from a strict rights-based point of view while the other is arguing from a utilitarian point-of-view.   Essentially she knows in her heart that she is restricting speech, but wishes to do so to reach a better outcome.  I made a couple of utilitarian arguments, including:

• I pointed out that when the stakes of government are so high, money and influence never goes away.  Just as in any economy, when you ban money, a barter economy arises.  So if we ban large campaign spending, then the quid pro quo becomes grass roots efforts and voter mobilization.  Groups like the UAW become more powerful (we are seeing that already).  They are trading their member's votes for influence.  Connected companies like GE are doing the same thing, trading their support for legislation that is generally hostile to commerce for specific clauses in said legislation that exempts GE and/or makes the laws even more punishing on their competition.  The problem with all this activity is it is hard to see and totally unaccountable -- at least with advertisements we see people out in the open with their agendas.
• I observed that it was smart to add term limits to her plan, as otherwise her recommendations would be the great incumbent protection act.  But by limiting money, immediate advantage is given to people who already have name recognition and celebrity.  Think we have too many actors and athletes running for office?   Well be prepared for a flood with stricter campaign finance restrictions

However, I tend to shy away form utilitarian arguments.  The best arguments I have against the notion that money can be restricted without restricting speech are:

• Her comment that I still had freedom of speech (ie I am talking freely in the car) with strict campaign cash restrictions ignores the actual wording of the First Amendment, which reads "Congress shall make no law ... abridging the freedom of speech."  Her test, which is "Am I still able to speak in some forum even if I can't in others" is not a valid test for conformance to the First Amendment.  Otherwise, speech could be restricted at will as long as there was some narrow safe harbor where one could express his opinion.    The better test is whether the proposed law, ie a restriction on how much and when a person can spend money advertising his or her opinions, abridges or reduces freedom of speech.  And I think it is hard to deny that everyone has less freedom, in the form of fewer options and reduced scope, after such legislation.
• One interesting test is to broaden the question -- Does restricting spending on something (in this case speech) constitute a restriction on one's underlying right to the activity (e.g. speaking freely).  I was tempted to ask her (she is a strong and vocal abortion rights supporter) whether she would therefore consider the right to abortion to be untouched by Congress if a law were passed to limit each person's spending on abortion to $5 a year.   Abortion would still be entirely legal  -- all government would be doing is putting on some spending restrictions.   Obviously one's scope and options to get an abortion would be limited -- only those who happened to have a doctor in the family could perhaps get an abortion -- just as under her speech plan only those who had a large newspaper in the family could speak fully and freely before an election.

Kudos to Kevin Drum for his obvious skepticism about California high speed rail.  Too often the left accepts high speed rail projects credulously, despite their backbreaking costs and little proven impacts on energy use or greenhouse gas production.

I have had back and fort over rail projects with supporters for years, and I am always particularly amazed at how supporters treat me like some kind of neanderthal  (e.g. "the debate is over!" and "rail is settled policy.")  I finally figured out the other day how to characterize rail supporters arguments.

They are like kids who might say, "why wouldn't you want Santa Clause to bring you an Xbox for Christmas?"  They treat rail like it is a birthday present, and that I am some sort of schlub for turning down such a shiny new present.  But of course it is not a present, and costs matter.  The problem with rail is not that I don't like riding on trains, the problem is that I don't like draining resources by force from millions of people so that a few thousand middle class commuters can ride on trains to work.

As I have written a number of times, reserves numbers for oil are not based on the total oil though to be under the ground, but the total oil thought to be under the ground that is economically recoverable at expected prices.  Changes in technology and/or oil price expectations change the amount of reserves, even without the discovery of a single new field.

Oil companies have known about the formation, and the oil trapped in it, since at least the 1950s. But they couldn't get more than a trickle of oil from the dense, nonporous rock.

That began to change in the early 2000s, when companies in Texas began using new drilling techniques in a similar formation near Fort Worth known as the Barnett Shale. They would drill down thousands of feet and then turn and go horizontally through the gas-bearing rock"”allowing a single well to reach more gas. Then they would blast huge volumes of water down the well to crack open the rocks and free the gas trapped inside.

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006."

So apparently, oil production in North Dakota may soon pass that of Alaska, though this is more due to the fact that production can be ramped up in North Dakota without an act of Congress, which is not the case in Alaska.

The largest threat to oil prices and production remains not peak oil, but the fact that most of the world's best reserves rest in the hands of state-run oil companies whose competence and willingness to invest for the long-term is sometimes in question.

I love it when Mark Perry rewrites trade stories

"U.S. Steel Unions Score American Consumers Dealt Yet Another Huge Victory Loss As China They Are Slammed With New Steel Tariffs Taxes"

One has to envy pity the insignificant amount of pull U.S. steel workers consumers and steel-using companies have. The majority of U.S.-China trade agitation is caused by imposes signifcant costs on this one relatively tiny huge part of the U.S. economy.

This is a pretty cool video showing green screen use in TV and movies.

I will say I don't really draw any philosophical conclusions about the meaning of life and reality from it, other than to say, "how cool is it that we can do this?"

Via Maggies Farm

Over at my Park Privatization blog, I look at an article in the Huffpo on privatization.  Apparently, the city of Chicago made at least five or six horrible contracting mistakes in outsourcing its parking meters, mistakes a private enterprise of any level of professionalism would never make.  The Huffpo's conclusion -- these mistakes by the city government are proof that privatization is a bad idea and that government needs to retain its size, scope and power.

If you are lonely and want to see your email box quickly fill up with messages from people you have never met, a great way to do that is to be interviewed on a national cable news show.  All of those who have written me, I am trying to get back to you all but I am a bit overwhelmed.

This was the trick behind cap-and-trade: Politicians know that the only real way to reduce energy usage is to raise its price much higher.  They also know that doing so would lose them their jobs, so instead of passing a simple carbon tax, they created a cap-and-trade system that would force private companies to be the bad guys.  They then try to hide this basic fact with a lot of distracting arm-waving about green jobs and wind power.

The new Obama health proposal, which looks a heck of a lot like the old Obama health proposal (same basic features, same lack of detail) plays a similar game.  Do you remember all that Obama talk about mysterious brilliant ways to reduce health care costs?  Where did they all go?  It turns out that the only real idea they had for reducing health care costs was to deny people care.  They just try to hide this with a lot of distracting arm-waving about gold-plated insurance and electronic medical records.

This denial of service is unpopular.  In fact, it is a great (and sad) irony that Obama is trying to harness anger at insurance companies that is caused mainly by denial of coverage for certain procedures with a system that will deny coverage for even more procedures.  Just like carbon taxes, Obama has fixed on a scheme where once again he sets up private enterprises to be the bad guys to give himself some sort of quasi-plausible deniability.  Obama is proposing artificial price caps on insurance premiums.  The inevitable result:

For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: "Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly "” i.e., to deny coverage for more services."  No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called "public option."

Alan Reynolds has more.  And Peter Suderman.   And Phillip Klein points to an interesting anti-progressive angle:

Like the Senate bill, Obama's proposal doesn't include a strict employer mandate, but it does penalize businesses who do not offer insurance to workers who then get their insurance through the exchange. The Obama proposal provides more subsidies to small businesses, and helps mid-sized businesses by exempting the first 30 workers when calculating the tax, but large employers who do not offer coverage would face higher penalties under the Obama proposal. In the end, the tax will make it more expensive for large employers to hire lower income workers (who qualify for government subsidies), and thus exacerbate unemployment.

My read is that this all takes a hodge-podge mess and, uh, makes it even  hodgier-podgier.

By the way, my take is that there is only one health care cost reduction proposal worth talking about, and that is making individuals more responsible for their own health care costs, not less, thus creating incentives to do the thing we do for every other purchase we make:  shop around.

Cross-posted from Park Privatization

Len Gilroy of the Reason Foundation links my Glenn Beck interview and then goes deep on park privatization issues.  Check it out.  Potentially the biggest benefit to the public:

Appropriation risk: State parks operating under a concession no longer bear the appropriation risk that we're seeing play out in real life across the country, as parks get axed from state budgets amid rampant state fiscal crises (some examples include California, New York and Louisiana). Really, this is more of a risk that's eliminated, rather than transferred to the concessionaire (see revenue risk discussion above), so revenue/demand risk and appropriations risk are really two sides of the same coin.

For the left, its all about keeping the government out of one's private decisions about his or her body, with the exception, of course, of any procedure not called "abortion."

Via the South Bend Seven, comes this interesting post on images at Barbarian Blog.

The total number of pixels [on an HDTV screen]  is 1920 horizontally x 1080 vertically = 2,073,600 pixels. There are 256 possible intensities of red, green and blue for each pixel, so that's 256³ = 16,777,216 possible colors. To figure out how many possible images there are, we need to raise the second number to the power of the first, so 16,777,216^2,073,600 = 1.5 * 10^1,4981,180 possible images. That's a pretty big number "“ it's almost a million and a half digits long. Printing it in 10 point Monaco would take over 2,700 pages of paper. Scientists estimate that there are 10⁸⁰ atoms in the observable universe "“ a tiny number in comparison.

However big it may be, the fact that the number is finite is a surprising thing to realize. It means that every possible image has a unique ID number. So instead of asking me, "did you see that picture of MIA performing pregnant at the Grammys", you might ask, "did you see image number 1,394,239,...,572?" Obviously that is totally impractical and it would make you a huge nerd, but it's interesting that you could.

Bloom Energy is introducing what looks like a 200kW fuel cell that runs on natural gas for about $700,000.  That compares pretty favorably with the current cost of at least $2,000 per KW to build a coal plant, especially when one factors in reduced distribution and pollution costs.  We have gobs of natural gas and are finding more all the time, and (unlike something like hydrogen) the distribution and storage infrastructure is already in place.  Hope it works.

I often critique new energy technologies here, and that critique is often confused with a hostility to new technologies.  This is far from the case.  Living here in Phoenix, I would love to have cheap solar cells to spread over my roof like carpet.  What I am opposed to is government subsidies for technologies that are not even close to economic compared to current alternatives.   I don't know the Bloom business model  (I am suspicious they have a large rent-seeking component if KP is funding them) but if they can make these work subsidy free, that's great.

See my discussion with Glenn Beck of my proposal to keep Arizona state parks open on my park privatization blog here or at Beck's site here.   My first TV interview, and I guess I jumped in the deep end.

I answered questions about the interview mechanics here, but one other thing people asked about - I don't know Mr. Beck nor have I had any contact with him until his staff called me out of the blue for an interview.  With the exception of Terry Gilberg at KFYI, I haven't even been interviewed by any of the local media so it was odd, and exhilarating, to jump right to a national stage.

Some of you may have seen me on Glenn Beck today.  If you are like me, and don't do stuff like that very often, you may be wondering just what being on such a show is like.

The process began with a call from one of Beck's assistants.  She spent over an hour with me in multiple calls to make sure she absolutely understood all the issues and could communicate them to Beck.  She also called the PIO at Arizona State Parks several times to get their perspective.  Then she had me come into the Fox local station in Phoenix.  This is where the process went a bit different than I expected.

First, I was still sitting in the green room about 9 minutes before I was supposed to go on the air, and thus was getting a bit nervous.  When they came to me, I expected to be taken to some tiny studio.  Instead, I was led out to the busy news floor, in the middle of all the desks with people working.   There, I found a camera and a stool.  They miked me and put on my earpiece.   Hearing the feed was a bit of a challenge, because people were on the phones at all the desks right near me.

Doing the interview is more like doing radio.  It may look on TV like we see each other, but I can't see Beck and can't pick up on his body language.  We end up talking on top of each other several times.  At one point, the lady at the desk next to me goes into a drawer for stapes or something and bangs my butt, ripping out my earphone and effectively disconnecting me from the show.

Anyway, it was fun and if given the chance, I expect to be better next time.  I will post a link to the video when I find it.

Talking about park privatization around 5:40 Eastern (though the segment has gotten bumped once before).

One of the perils of being a populist, as John McCain is finding out, is that the public is allowed to change its mind, but politicians who attempt to follow them end up looking bad.

the four-term senator says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis, the housing meltdown.

"Obviously, that didn't happen," McCain said in a meeting Thursday with The [Arizona] Republic's Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. "They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors.... What they figured was that if they stabilized Wall Street - I guess it was trickle-down economics - that therefore Main Street would be fine."

I am not sure this is much of a defense.  Even without McCain's access to such financial luminaries, I and many others predicted at the time the $700 billion slush fund would be used as, well, as slush fund to bail out the politically well-connected.  I must admit I didn't see the GM/UAW bailout coming, but its not wildly surprising in retrospect.

Unfortunately for all of us, McCain's competition in the next election, JD Hayworth, is even less appealing.

I am on 550 KFYI radio at 8 tonight in Phoenix talking about my offer to keep state parks open. Update: The audio is posted here.

I have started a new blog because, you know, I don't have enough to do already.  To some extent this is a reaction to a lot of interest I am getting on the topic of recreation privatization, and in part because the nature of climate blogging has changed of late to requiring one to keep up with a fast flow of stories, and I just don't have the time.  Anyway, the new blog is called Park Privatization.  I hope those who are interested in the topic find it compelling.  If nothing else, at least with this post Google will now find it.  I will still post here regularly and on the climate blog as often as I can.

In opposition to a proposal for park privatization in Utah:

Mary Tullius, director of the Division of State Parks and Recreation, doesn't think so.  She says the state prides itself on giving Utah families affordable destinations like state parks. And if those destinations were made private, the quality would suffer.

"History has told us that whenever you privatize something people are so focused on making money that they don't pay attention to the infrastructure or to the maintenance of the facility. What happens after five years and they've run something and they haven't taken care of it and they turn back to the state? And then the state has a much bigger problem," she said.

This is hilariously wrong.  As readers probably know, my business is the private operation of public parks.  The number one problem we have in taking over government parks is that they are usually terribly run down.  By the time the government is finally willing to turn to private companies for help (generally in the category of "last resort") the government has typically been ignoring the capital maintenance needs of the parks for years.  As I have written before, government is terrible about appropriating sufficient amounts of capital maintenance dollars.  We see it in everything from parks to the Washington metro.

Nowadays, as a condition of taking over the operation of public parks, our company is generally asked to make a large up-front contribution to tackling deferred maintenance in the park.  In fact, in our newest contract with the Tennessee Valley Authority, we actually have rebuilt the entire park and campground from the ground up.

I am sure there are some private operators who have let things run down, but in general this has occurred when the public authority has insisted on giving the operator a series of 1-year contracts rather than a real 10-20 year contract.  Who is going to replace the roof if the contract only lasts for another 6 months.  On the other hand, who is going to fail to keep things nice if he knows he is going to be there for another 15 years?

I hear this kind of rant from people within the government all the time.  They seem to believe it, but it is hard to find an example where it is true.  When I worked for an oil company, they planned on having to totally rebuild their retail stations every 20 years or so.  What legislature plans for this kind of expenditure?

My current proposal to keep a number of Arizona State Parks open is here.

Jerry Taylor echos my point I made last week that supposedly conservative supporters of nuclear power are ignoring the problem of huge government subsidies.

There is an interesting phenomenon in public discourse that I don't have a name for.  Take nuclear power.  Many of the people who oppose nuclear power do so for some pretty flawed reasons.   I think there is a natural tendency to take the other side of the argument when one sees this happening, even if by first principles one should joining the opposition to nukes but for different reasons.

I know I was pulled into having some initial sympathy for the Iraq war for just this reason, because the war-opposition arguments seemed so stupid (e.g. France won't like us as much!)  The correct argument on Iraq was not that Iraq didn't suck (it did) but that so many countries suck just as bad it was an impossible task to start knocking them off using large portions of the US Military, thousands of lives, and trillions of dollars each time out  (I call it the "cleaning the Augean Stables argument).